DislikedIf any of you don't understand what I am about to say, you should not be trading any cross pairs. I also mentioned this before.
There is a direct correlation in most cross pairs with their USD counterpart multiplied together or divided by each other. Not one other pair alone but the two counterpart USD pairs.
In the EUR/JPY, it is the EUR/USD and the USD/JPY.
EUR/JPY = EUR/USD x USD/JPY
Pull out your calculator and enter the current price of the EUR/USD. Multiply that number by the current price of the USD/JPY and then compare the answer to the EUR/JPY. Notice a striking similarity?
Let's take the price as of now. The EU is trading at 1.5462. The UJ is trading at 108.31.
1.5462 x 108.31 = 167.47
This works with most yen cross pairs and many others.
AUD/JPY = AUD/USD x USD/JPY
GBP/JPY = GBP/USD x USD/JPY
GBP/CHF = GBP/USD x USD/CHF
etc...
etc...
Other crosses need to be divided instead of multiplied, i.e.
EURGBP = EURUSD / GBPUSD
EURCHF = EURUSD / USDCHF
There are some that don't work this way (i.e. CAD/JPY). I don't trade these, so I have not bothered to find their exact formula.
So at times there are 100% certainties here. When the EU is going down and the UJ is going down, it is 100% guaranteed that the EUR/JPY is going down!!!
This is a great quote:
"All FX transactions flow through the USD in order to promote liquidity. If you want to buy AUD/JPY you must sell JPY vs. USD and then sell USD vs. AUD. AUDJPY is nothing more than a mathematical calculation of the the two currencies vs. USD from the resulting transaction."
From: http://www.forexfactory.com/news.php?do=news&id=99120Ignored
If your broker's price does not equate (i.e. difference of a few pips), it's because they are not quoting the correct interbank prices.